Suits Only, a dry cleaning firm that specializes in cleaning business suits, operates in a perfectly competitive market. Robin Smith, an exceptionally talented manager, has been hired to manage Suits Only. In the dry cleaning business, a manager typically makes a salary of $400 per week. Suits Only faces the long-run average and marginal costs shown in the figure below. In long-run competitive equilibrium, the market price for cleaning a business suit is $4.50.
Given the above, Robin Smith is probably going to negotiate a salary of ________ per week, ________ of which is economic rent.
A. $500, $500
B. $400, $0
C. $475, $75
D. $500, $100
Answer: C
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If there are no changes in inflation expectations, a purchase of government bonds by the Fed in the open market will cause ________
A) the federal funds rate to rise and the long-run expected real interest rate to fall B) both the federal funds rate and long-run expected real interest rate to fall C) both the federal funds rate and long-run expected real interest rate to rise D) the federal funds rate to fall and the long-run expected real interest rate to rise
If the coefficient of elasticity is 25,
A) demand is 25%. B) demand is about to change for the better. C) demand is very elastic. D) demand is very inelastic. E) the law of demand hardly applies.
If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until
A) the quantity demanded equals the quantity supplied. The product will then no longer be scarce. B) quantity demanded equals quantity supplied. The market price will then equal the equilibrium price. C) only wealthy consumers will be able to afford the product. D) quantity demanded equals quantity supplied. The equilibrium price will then be greater than the market price.
Recently, the financial crisis led to a bank run in
a. Brazil. b. Germany and France. c. Japan. d. England.